PARTIES TO CONTRACT

•Privity •Capacity•Factors affecting free consent

Privity of Contract

GR-only party to contract can sue and be sued

3rd party x sue/be sued although for his benefit

S.2(d) – though consideration may move from 3rd party, he x enforce contract

Except in certain situations causing injustice

Schmidt v. Kepong Prospecting

Offer RM100

B

agree

A

Cut grassC

(3rd party)

Capacity to contract

S.10(1) : Agreement are contract if made -by free consent -competent party -for lawful consideration -with lawful object -and x declares as void

S.11 : who is competent? -age of majority -sound mind -x disqualified e.g. bankrupt

Age of majority

Person attaining age of majority can affect a valid contract

S.2 of Age of Majority Act 1971 : 18yrs

Below 18 = minor

Contract made by minor is void

Sound mind

S.12 : defines sound mind

-can understand the nature & effects of contract

-at the time of contract

Temporary sound mind can make contract

consent

S.13

-2 or more persons

-agree upon same thing

-in the same sense

S.14

-consent is free when x affected by

-coercion

-undue influence

-fraud

-misrepresentation

-mistake

Who can make valid contract?

Adult – above 18 years old

Sane

qualifiedIndicate that party consents to the contract

Issue of minor

General rule: Contracts made by minor are void Mohari Bibee v. Dhurmodas Ghose (1903) -minor x make a valid contract Tan Hee Juan v. Teh Boon Keat (1934) -Transfer of land by minor was void

Exceptions:-contracts for necessaries-contract of scholarship-contract of insurance

Contract for necessaries

Necessaries: essential things to existence and reasonable comfort, e.g. food, clothes

Luxurious things are excluded

Government of M’sia v. Gucharan Singh

-education is included under necessaries

Contract for necessaries

S.69 : allows the supplier to be reimbursed from minor’s property

Conditions :

1. Necessaries actually supplied

2. Claim reasonable amount

3. Minor is x personally liable – obliged to pay it If only he has property

Contract of Insurance

16 years above: can make insurance contract

10 years – 16 : with guardian’s consent

Coercion

S.15 – do/threat to do any act forbidden by Penal Code

-unlawful detaining/ threat to detain any property

-with intention to cause him to enter into any agreement

Applicable where PC is not applied, e.g. threat to kill on high seas

Kesarmal s/o Letcman Das v. Valiappa Chettiar

-consent x freely given, thus agreement was voidable

Undue Influence

S.16 – influence by one of dominant position to obtain unfair advantage

Alcard v. Skinner

-gifts of stock & will to spiritual advisor were voidable

Fraud

S.17 – deceitful act which induce person to make a contract

E.g. selling a vicious horse

Wong Cheong Kong v. Prudential Assurance

-involved alleged fraudulent insurance claim

Misrepresentation

S.18 : causing a person to make contract by making false representation

Peek v. Gurney

-appellant sued promoter of Co

-purchase shares of Co after relying on false statement in the prospectus

Fraud v. Misrepresentation

Misrepresentation

-maker believe that representation is true

-no intention to cause misrepresentation

Fraud

-maker himself x believe in the truth

-have intention to cause misrep & cheating

Mistake

When make a contract under some misunderstanding in certain circumstances

Can allege that the contract is defective coz if they had known the true facts, would never entered into the agreement

S.21,22 and 23

1) Common Mistake

Both parties make mistake to a fact which is fundamental to agreement

E.g. both unaware tt SM had already perished at the time of contract

Effect – there is consent, but because of mistake, consent is nullified. Mistake nullify consent

Oh Hiam v. Tham Kong

-oral contract for sale of rubber land in Gombak

-written contract include a land and house in Setapak

-held : set aside coz x intention to buy Setapak property

2) Mutual Mistake

Parties misunderstand each other & at a cross-purpose

E.g.

Ali intends to offer his Proton Saga Sedan for sale

But Bala believes that the offer relates to Proton Aeroback also owned by Ali

3) Unilateral Mistake

Only 1 party is mistaken

The other party knows of the mistake

E.g. –Ali agrees to buy from Bala a specific picture which Ali believes to be a genuine Lat. But in fact, it is painted by an amateur artist, Cico

If Bala ignorant of Ali’s erroneous belief = MM

If Bala knows = MM

Effect of Mutual Mistake & Unilateral Mistake There is apparent consent

But mistake negatives such consent

In fact, there never is any agreement at all between the parties

Mistake Of Law

S.22: contract valid

Mistake as to law is no excuse

E.g. Ali and Bala make a contract on erroneous belief tt a particular debt is barred by limitation

The contract is not voidable